Smartphones have become an indispensible part of our daily lives, and with the rapid advancement of technology, the temptation to buy a new smartphone every year is particularly strong, particularly among the younger generation. But what about the financial consequences? Here’s the breakdown:
Smartphone launch cycles are shrinking. With the exception of Apple, which still follows the old practise of launching smartphones once a year, new models are now being launched within a few months, as opposed to previously, when manufacturers would launch one every year.
Several online retailers, including Flipkart, have implemented a system that allows people to frequently upgrade their smartphones. Flipkart offers a Smart Upgrade plan, which allows users to pay 70% of the price for a Samsung Galaxy series or Realme phone and either pay the remaining 30% or return the phone a year later.
“While we pioneered the Smart Upgrade and Product Exchange last year and received an encouraging response,” said Ranjith Boyanapalli, head of Flipkart’s fintech and payments group, “we are expanding the offerings this year to make it more widely accessible to our customer base, including those who are new to credit.”
“I used the scheme to buy a Realme phone last year, and this year, I will upgrade to the latest model whenever it is released,” Tuhin Mallick, a private company employee and part-time tattoo artist, says. This has allowed me to reduce the cost of the phone and will allow me to get the most up-to-date technology. As a result, I’ll always have the most recent smartphone.”
Following the trend of frequently upgrading smartphones, most young people are likely to change their smartphones for a variety of reasons, such as improved gaming experience, camera, or others. All of this, however, comes at a cost.
According to Rachit Chawla, founder and CEO of Finway, a Delhi-based financial services company, investing in new smartphones every year can be an extravagance for many, because the prices of electronic devices rise significantly each year while the features remain relatively unchanged.
“However, even while taking advantage of these financial benefits (buy now pay later, equated monthly instalments, consumer loans), buyers should be cautious about their expenses, as these can increase pressure on their future expenses.” Additionally, investing the money that would have been spent on a smartphone in savings plans such as liquid or short-term debt mutual funds, fixed deposits, and others can be a more prudent financing strategy,” Chawla adds.
The Financial Calculations
Assume ‘A’ and ‘B’ both purchase smartphones worth $245 in 2022. Every year, ‘A’ upgrades to the latest series, while ‘B’ upgrades every three years.
The exchange rate is fixed at 40% of the cost of the mobile phone, and the cost of the same series smartphone increases by 10% per year.
According to the calculations, ‘A’ spends approximately $1040.00 (after adjusting for exchange value) to acquire six smartphones over a six-year period, whereas ‘B’ spends approximately $500 (after adjusting for exchange value) to acquire two smartphones over a six-year period. The cost difference between the two people is $530.00
So, while ‘A’ gets all of the latest tech and other goodies in a smartphone every year, he has also spent more than twice as much as ‘B.’
This is the additional cost that one will incur if they continue to upgrade their smartphones every year.
While some people may need to upgrade to better devices every year for work or other reasons, upgrading smartphones every year may not make sense for most average consumers, unless it is for pure aesthetic or recreational purposes.
Most smartphone manufacturers now provide longer software updates for their devices.
Samsung has committed to four generations of software updates and security updates for their S, Z, and A smartphones and smartwatches over a five-year period.
“We are taking our commitment to innovation one step further with up to four generations of One UI upgrades to ensure our users enjoy the best possible mobile experience for longer,” said TM Roh, president and head of MX Business at Samsung.
Realme has pledged three major Android OS updates as well as four years of security updates. Oneplus, Xiaomi, and other companies have also committed to longer-lasting device software updates.